Opinion: Entrepreneurs make mistakes, but they pick themselves up and have another go.
Entrepreneurship has become a popular buzz-word in many parts of the world and is often enthusiastically embraced by governments seeking to stimulate job creation and economic growth. Successful entrepreneurs are frequently show-cased in the media and some have even achieved celebrity status. Yet this success is typically an outcome of years of struggle and hard work.
Anita Roddick, founder of The Body Shop once said “Nobody talks about entrepreneurship as survival, but that’s exactly what it is and what nurtures creative thinking”. What she was highlighting is the need for entrepreneurs to apply creativity to generate innovative solutions to solving problems. However, she was also acknowledging the challenges that entrepreneurs have to overcome to achieve their goals.
As part of an MBA program in entrepreneurship at the University of Western Australia a study was undertaken to collect the case histories and lessons from 50 entrepreneurs. These entrepreneurs ran their business ventures in a wide range of industry sectors. What follows is a summary of the lessons learnt from this study, which provides insight into the challenges faced by entrepreneurs and their willingness to pursue their goals in the face of setbacks and hardship. I have summarised a few of these entrepreneurs.
Case Example 1
This first entrepreneur was the founder of a successful HR consultancy services business. He claims to have made many mistakes in his business career with lots of financial costs. However, he commented that “if you are not making mistakes you are not learning”.
One previous venture failed because he did not get the right “people fit”. He knew that the partners were not quite right, but thought that he could solve it with hard work. This was not the solution because one of the partners lacked the same level of passion and commitment for the business. The key things he seeks to avoid when hiring employees and engaging business partners are selfishness, poor ethics and the tendency to panic in a crisis. His approach to business decision making is: “know your numbers, know your customers and have the courage to live your dream”.
For this entrepreneur the key lessons he had learnt were:
- Realise that making mistakes is simply a part of the learning process.
- Make sure that you select your business partners carefully to ensure that they hold the same values as you, particularly their commitment and passion for the venture.
- Build your company around good people and take care to select those who are good team players.
- Focus on measuring the performance of the business.
- Focus on understanding what your customers' needs and wants are.
- Have the courage to fulfil your vision.
Case Example 2
Our second entrepreneur established a successful engineering consultancy specialising in project management, process plant design and general engineering design for the minerals and metallurgical processing industries. He established his first business venture while living in Asia in the mid-1980s, but this failed and resulted in bankruptcy. He left Asia and returned home to work as a salaried manager, rebuilding his financial strength. The principal reason for this business failure was attributed to “ad-hoc or nil business planning”.
His current business venture was launched in the 1990s out of necessity when he was made redundant. He wrote the business plan for the company “over a single weekend”, but felt that he had a clear sense of direction for where it was heading. Since establishing the firm he has sought to involve business partners to join him. This has been motivated by a desire to build up a strong management and technical team and assist with future growth.
The key lessons he felt he had learnt were:
- Planning is valuable.
- Failure in business is nothing more than an opportunity to learn.
- The business model is more important than the documented business plan.
- You must have a clear vision for how the business model will work.
- Look to surround yourself with good people who can complement your own skills and share the load.
Case Example 3
Our third entrepreneur was the founder of a successful manufacturing business producing a range of innovative, high quality industrial safety products. The business had grown from start-up in the early 1990s to having a turnover of over $50 million with a workforce of 70 employees. This entrepreneur sacrificed his job, his house and his marriage to get the business to this stage. At one point he had held his entire worldly possessions in the boot of his car.
When he had first launched his innovative new products on the market they were undoubtedly superior to the competition, but had to be sold at a price 50% higher than the nearest rival. Distributors refused to carry them due to fears that they would not sell at this premium price. He was forced to revisit his business model, skipping over the wholesaler and retailer and selling directly to the end user.
To secure sales the entrepreneur was forced to spend months living in a caravan travelling around the country. This placed enormous stress on his family life and led to the failure of his marriage. He spent four years living and travelling long distances from home while he built up his sales and distribution network. However, he was rewarded by securing sales from several blue chip companies and developing his products as market leaders.
The key lessons this entrepreneur felt he had learnt were:
- Manage your working capital.
- Document your business plan.
- Market a quality product.
- Protect your intellectual property as much as possible.
- Surround yourself with a board of directors that you feel comfortable dealing with and who are competent business people.
- Be determined, stay focused “get on with the job” and have faith in yourself.
Case Example 4
This fourth entrepreneur is a successful mining engineer with significant investments in small mining companies. He quit his well-paid job as a mining engineer to buy into a small mine and run it more innovatively. However, he soon found that the banks would not lend him the $28 million he needed to buy the mine. Despite this initial set back he managed to secure support from corporate investors and worked for the first year without any pay. He took a 12% shareholding in the mine, which proved successful. Two years later he sold out his shareholding for $11 million.
The key lessons this entrepreneur had learnt were:
- Follow your passion and take calculated risks if you feel the venture is achievable.
- Don’t be deterred by early set-backs, others can share your vision and share the risk.
- Use innovation and courage to achieve your goals.
Case Example 5
Our fifth entrepreneur is a highly creative individual with a passion for cooking and teaching. She founded a cooking school that offers people fun and exciting courses in the preparation of gourmet meals within their own kitchens. A serial entrepreneur she had previously established a catering business with a partner that serviced major hotels and retail chains. However, this first business struggled due to a lack of working capital, no business planning and poor cash flow. Further, the business partner did not share the same vision and values resulting in disagreements between the two partners. The business eventually failed leaving her with a debt of over $120,000.
Following this failure our entrepreneur was forced to go back to salaried employment to help pay off the debt. She worked at this for four years, but never lost her dream. The cooking school she has now was built on the lessons learnt from her first failed venture.
Looking at her experiences the key lessons learnt were:
- Use your intuition because it never lies to you.
- Surround yourself with good quality people who are more experienced than you and learn from them, surrounding yourself with “equals” is a waste of time.
- Build a network of positive people to support you.
- Rely on business advisors, accountants and change them if you are not happy.
- Think like a millionaire.
- Don’t be frightened to take risks and invest money.
- Believe in yourself.
These are only 5 of 50 cases, but their stories are not unique. As one of the other successful entrepreneurs explained, you must learn to back yourself and learn from any mistakes. It is important to follow your vision and balance the vision with strong analysis and regular self-evaluation. You should not become arrogant or egotistic. As he said: “Don’t believe your own bullshit!” Instead you must learn to read market signals and respond with a sense of urgency. Business can be stressful but this same entrepreneur suggested that: “Stress is like eating Chillies – the more you eat the less hot they become”.
Summarising the Key Lessons
Having examined all 50 case studies of these successful entrepreneurs who represent a wide-range of different industries and come from all walks of life, the common threads that emerge may be summarised as:
- They all have a burning passion for what they do.
- They don’t plan in a formal way, but they do have a clear vision for where they want to go.
- They all face constant problems with cash flow, loss of sales, financial losses and near or actual bankruptcy at some time in their business careers, particularly the early years.
- They make mistakes, but they pick themselves up and have another go.
- They learn that the most important thing is to network and seek to use their network to acquire the money, people and other resources that they need to keep going.
- They are creative and use innovation to achieve future growth.
- They look for ways to differentiate their business through a re-invention of the business model.
- They attract clever, capable people to work with them to help them fill in the gaps they are not able to with their own skills or expertise.
- They have faith and they never give up.
Hopefully this inspires, stimulates thinking and makes you realise that you are not alone.
Note: This article was first published in “The Innovator Blog”.
Tim Mazzarol does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.